Report: Fed’s financial position was $8 trillion worse in 2019 before coronavirus hit

The financial condition of the U.S. federal government worsened by $8 trillion in 2019, according to a comprehensive analysis of the 2019 Financial Report of the U.S. government. The report is prepared annually by the Department of Treasury, in coordination with the Office of Management and Budget.

The Chicago-based nonprofit educational organization Truth in Accounting (TIA), analyzed the report in its “Financial State of the Union” report, which found that the financial condition of the federal government had worsened well before the coronavirus crisis ever hit.

“The U.S. government is the largest, most diverse, most complex and arguably the most important financial entity in the world,” TIA states. Yet, according to the latest available audited financial reports, its overall financial condition worsened by $8.16 trillion in 2019.

“Our federal government’s financial position was already deteriorating before it embarked on a massive spending and borrowing response to the pandemic,” Bill Bergman, director of research at TIA, told The Center Square in an email. “I’m reminded of how AIG was issuing massive insurance backstops for mortgage-backed securities, with insufficient capital, before the crisis in 2007-2009. Our government is different from AIG, of course, because it has the powers to tax, and to set monetary policy – e.g., inflate the value of our money away. These powers may support our government in the short run, but threaten citizens and taxpayers in the long run.”

The report also breaks down the national debt to a per-Taxpayer Burden, representing what each taxpayer would have to pay to cover what the federal government owes.

While most analysts focus on the budget deficit of $984 billion, the overall decline in net position presents a better picture of the government’s financial decline, TIA explains. The organization measured the government’s negative net position, which includes reported federal assets and liabilities, and promised, underfunded benefits like Social Security and Medicare.

“Our elected officials have made repeated financial decisions that have left the federal government with a debt burden of $113.27 trillion, including unfunded Social Security and Medicare promises,” the report states. That equates to a $737,000 burden for every taxpayer.

The federal government only has $3.99 trillion in assets compared to what it owes: $117.26 trillion worth of bills. The difference is a $113.27 trillion shortfall. If every taxpayer were to pay off this debt, they would each owe $737,000.

The taxpayer burden alone warrants an “F” grade for the federal government’s budget management, or lack thereof, according to the report.

The Treasury Department includes only $173.70 billion of Social Security and Medicare liabilities on the federal balance sheet because, according to government documents, recipients do not have the right to benefits beyond the benefits currently due, and laws to reduce or stop benefits can be passed at any time. The TIA analysis includes $52.72 trillion in unfunded Medicare benefits and $37.60 trillion in unfunded Social Security benefits.

TIA based its analysis solely on data from the Financial Report of the U.S. Government for the fiscal year ending Sept. 30, 2019.